What Is An Opportunity Mindset And How Can It Benefit Traders?
Entering the trading world can feel at times like a voyage into the unknown, and even people with extensive financial experience know that for all that you can predict in this world, nothing is entirely certain.
Different traders will have very distinct responses to that revelation. For some that can be intimidating, especially if they are working in a proprietary trading firm and thus the money they are trading with is the firms’, and foster a fear of failure.
Others will respond very differently. Some traders, particularly during the one-step evaluation process for funding, will see this as a way to test their short-term and long-term planning. Others will relish the chance of testing their skills against the variable weather of the market and see any knockbacks as lessons to be learned.
There are all different mentalities, and whilst there is so much in both trading and life that we cannot control, one aspect that is within our control is our reactions, responses and mindsets.
Adopting a mindset where you see opportunities instead of challenges, lessons instead of failures and development instead of deficiency is not only an exceptionally helpful way to get ahead, it is an absolute necessity for traders who want to maximise their success.
In this guide, we will explore what an opportunity mindset is, how it benefits traders both personally and professionally, and explore how to develop an opportunity mindset.
What Is A Mindset?
A mindset is something everyone has and uses in almost every moment, often without realising it and how much it affects our decision-making.
Whilst there are slight variations on this definition, a mindset in psychology is the set of beliefs, values, attitudes and dispositions that shape how we interpret and respond to a given situation.
Mindsets are huge, often very complex mixes of past experiences, subconscious biases and collections of information from various sources that act as a filter that help us to prepare and respond to a situation.
Every thought we have is governed by a mindset and by extension the many, many factors that build up that mindset, from what we eat, to how we interact with friends, colleagues and romantic partners, to how we respond to adverse events in our lives both then and in the future.
For example, in education, if you receive a lower grade than you might expect, one potential mindset would see this as a sign of failure, which can lead to a negative feedback look and affect overall progress and attainment, whilst another mindset would see this as a target for improvement.
This is the difference between a fixed and a growth mindset. Fixed mindsets believe that their fundamental traits are set in stone, success is a result of inherent ability and failure is a signifier of inherent limits. Fixed mindset people prefer to stick to what they know because success is more certain that way.
Growth mindsets on the other hand believe that anything can be improved through learning, perseverance and doing the work to build up skills slowly, and failure is not encountering adversity but giving up in the face of it.
Finding Opportunity In Crisis
An opportunity mindset is a variation of a growth mindset which takes the core principle of learning, improving and building oneself up through effort and learning lessons from past events and expands on it considerably.
It is seeing the window that opens whenever a door closes, it is the realisation that every challenge, even ones that are unsuccessful, makes you better in some way than you were if you had not tried it.
The difference between a growth mindset and an opportunity mindset is that whilst a growth mindset focuses on the process of building up towards success, an opportunity mindset is about finding strength and new chances directly through adversity.
Michael Jordan, the legendary basketball player, summed up his career by saying that the reason he succeeded is because he failed over and over again.
For some people, getting into trading after facing redundancy or professional struggle was in itself an example of using an opportunity mindset, as they resolved to learn trading skills and build themselves up to pass the evaluation.
A lot of the most inspirational stories of startups and self-made people often involve an opportunity mindset. In a lot of cases, startup founders try (often many times) and fail but in a way that directs them towards ultimate success.
Facebook started, quite infamously, as a clone of the website Hot or Not before evolving into a college-based social media platform that later took over the world. Airbnb was initially a stopgap to ensure that Brian Chesky and Joe Gebbia could pay rent.
Rather than see failure as catastrophic, an opportunity mindset sees it as part of the path to ultimate success, and that approach can be achieved with the help of five simple steps, as imagined by Jayson Demers and applied directly to the field of market trading.
Step One – Inoculate Yourself To Failure
Life throws curveballs at almost every one of us almost every day, but we seldom notice unless it affects us in a particularly intense way.
After all, stocks oscillate in price; they do not follow a straight line up or down but instead will constantly be gaining and losing value. If we worried about every microloss it would be impossible to trade properly.
So the best way to handle losses is to accept that not every single trade will “win” or gain more than its initial investment. By accepting that losses are to some extent inevitable, you inoculate yourself against loss aversion and can have a far more accurate perspective on your progress.
After all, a string of losing trades does not matter if you make a trade so successful those small losses are wiped out in an instant. It is about perspective, intensity and the bigger picture.
Step Two – Discard The First Thought In A Crisis
First impressions are incredibly important in any situation, as they not only shape our initial reactions but can often calcify our mindset to a particular moment, which is perfectly fine when a flight-or-fight response is vital to survival, but in other cases can stop us seeing the opportunity in a problem.
If a stock starts to tick downwards it can create a cascade of emotions that can flood into a disproportionate and unhelpful response, creating worries about whether you should realise it, what it means for your long-term strategy, or whether it could have a knock-on effect on other stocks.
That first reactive thought, sometimes referred to as a “System 1 thought” is your instinctive, unconscious reaction, and it’s not always the best one to use. Sometimes it is best, no matter how difficult it is, to discard it and wait for your logical System 2 thoughts to take hold.
The best way to do this is to not consider losses or gains emotionally, and this can take some time and some training to get used to. Try it on smaller-scale challenges such as a reaction to knocking a glass over or accidentally making a spelling mistake in an email and work your way up.
It is okay to find it difficult; we have these strong emotional reactions for a reason after all.
Step Three – Depersonalise Decisions
Are you a person who gives fantastic advice, either personally or professionally, but can struggle when facing the same situations yourself?
Do not worry, you are far from alone in this matter, but a potential solution is to cut away the personal implications of the decision and think of a trading decision from the perspective of someone else that you are advising.
Instead of wondering whether you would be missing out if you did not jump onto a rocketing stock (a common instinctive FOMO reaction), ask yourself if you would suggest someone else invest in that stock.
Step Four – Isolate The Objective From The Imaginary
The antithesis of an opportunity mindset is a slippery-slope mindset, which is the tendency to catastrophize and exaggerate the potential consequences of actions.
It is a vestige of our early survival instincts, as it never hurt anyone to over-prepare when a lack of preparation meant death, but on the trading floor and in most aspects of modern life, it is not only unhelpful but can be actively harmful to trades and your mental health.
The best way to remove the power of imaginary exaggerated threats is to write down a list of the consequences of any challenges, as the process of translating your thoughts to writing and actualising them removes their power and reveals that there was far less to fear than originally believed.
Step Five – Focus On The Next Step
Continuing from the concept of System 1 and System 2 thinking, a beneficial side effect of waiting for that second thought to spool up is that you see the opportunities and improvements that can be made rather than the frustrating problem at hand now.
Instead of looking at the stock losing value, take time to explore your trading plan and your contingencies. Stick to your stop-loss orders and consider a holistic view of your portfolio and its diversity. Losses often feel more painful in the moment than they are in the long run.
If necessary, stop trading for the day and give yourself time to go through this process of preparing for the next step and the next day.